Avoid payday loans this Christmas

Scotland’s new national consumer advice service has launched a campaign to inform Scots of their rights if borrowing from a payday loan company this Christmas.

The consumeradvice.scot service, run by the charity Advice Direct Scotland and funded by the Scottish Government, has also published tips on budgeting to help people avoid borrowing cash at exorbitant rates.

The advice includes highlighting the role of credit unions and the importance of checking the APR percentage figure, not the monthly repayment level.

Consumeradvice.scot was launched in April this year following the devolution of powers to the Scottish Parliament, and provides free, impartial and practical advice on any consumer-related issue.

Colin Mathieson, knowledge coordinator with consumeradvice.scot, said: “Christmas is just around the corner, and with that, many of us are tempted - or forced - to overspend and overstretch our finances.

“With parties, dinners and gifts to pay for, we may wake up on the other side of New Year with a nasty financial hangover.

“Banks often have strict guidelines on who can borrow, taking into account their ability to repay, so the alternative for many is to reach out to easier-to-obtain payday loans, with higher rates of interest, resulting in a much larger long-term repayment.

“This can cause those already in debt to become even deeper embroiled in the cycle of further high interest, borrowing to meet loan repayments, and other monthly commitments.

“But it’s important that consumers know their rights and many customers and former borrowers of payday loans do have the ability to claim back the exorbitant interest that they have lost.

“And by following our tips on budget management, people across Scotland can avoid resorting to payday loan lenders.

The campaign highlights the Financial Conduct Authority good practice customer charter, which sets out rules that payday loan companies must follow.

Advice issued by the campaign includes planning meals in advance and writing a shopping list before going to the supermarket, avoiding impulse buys and shopping around to find the best deals.

For more, visit consumeradvice.scot

An expensive holiday

Callum, 26, from Glasgow, contacted consumeradvice.scot about his experiences with payday lenders after being refused a personal loan and credit card with his bank due to not meeting the affordability criteria set out in the application process.

“My wages have always been lower than my friends. They can go away for weekends and holidays without as much thought about the costs involved. For me, having to save for these luxuries, whilst paying my monthly bills means making a lot of sacrifices and living cheaper.

“I’d paid the flights and accommodation off by saving, but the spending money was a struggle for me…Ibiza isn’t a cheap place to go to and I borrowed £800 for the week. It was all very well and good at the time of the holiday, but the following month the realisation hit me that the monthly repayments were so expensive, almost £270 per month, and in the long-term, paying back almost double what I had borrowed when paying this over six months.”

Callum had to take out another three payday loans to make the monthly commitments and quickly found himself digging deeper into debt. It was only by understanding his rights as a consumer and understanding that the payday loan company should not have originally authorised his loan that he was able to take back control.

He used the process outlined by consumeradvice.scot to regain control of his finances, allowing him to clear loan balances over a longer period of time.

TFN is published by the Scottish Council for Voluntary Organisations, Mansfield Traquair Centre, 15 Mansfield Place, Edinburgh, EH3 6BB. The Scottish Council for Voluntary Organisations (SCVO) is a Scottish Charitable Incorporated Organisation. Registration number SC003558.